PNC Bank 2008 Annual Report Download - page 41

PNC’s Tier 1 risk-based capital ratio was 9.7% at
December 31, 2008 compared with 6.8% at December 31,
2007. The increase in the ratio from December 31, 2007
included the issuance of Tier 1 eligible securities during the
first half of 2008 totaling $1.3 billion, including REIT
preferred, noncumulative perpetual preferred, and trust
preferred securities. The “Perpetual Trust Securities” and
“PNC Capital Trust E Trust Preferred Securities” portions of
the Off-Balance Sheet Arrangements and VIEs section of this
Item 7 and Note 19 Shareholders’ Equity in Item 8 of this
Report have additional information regarding these securities.
In addition, $7.6 billion of preferred stock and a common
stock warrant was issued to the US Department of the
Treasury under the TARP Capital Purchase Program on
December 31, 2008. Tier 1 risk-based capital further increased
as a result of $5.6 billion of common stock issued in the
National City acquisition and PNC’s assumption of $2.6
billion of Tier 1 qualifying capital securities previously issued
by National City. These increases in capital were partially
offset by the deduction of higher acquisition-related intangible
assets. The positive effect on the Tier 1 ratio of the net
increase in capital was somewhat offset by an increase in risk-
weighted assets primarily related to acquisitions, including
National City.
The leverage ratio at December 31, 2008 reflected the
favorable impact on Tier 1 risk-based capital from the
issuance of securities under TARP and the issuance of PNC
common stock in connection with the National City
acquisition, both of which occurred on December 31, 2008. In
addition, the ratio as of that date did not reflect any impact of
National City on PNC’s adjusted average total assets.
PNC’s tangible common equity ratio was 2.9% at
December 31, 2008 compared with 4.7% at December 31,
2007. The decrease in the ratio from the prior year was the
result of the decline in the value of the securities available for
sale portfolio and the value of assets in our pension plan. We
expect PNC’s tangible common equity ratio to be less
sensitive to the impact of widening credit spreads on
accumulated other comprehensive loss going forward
primarily due to the composition of the securities available for
sale portfolio acquired from National City and a substantially
higher level of common equity in the combined company.
The access to, and cost of, funding new business initiatives
including acquisitions, the ability to engage in expanded
business activities, the ability to pay dividends, the level of
deposit insurance costs, and the level and nature of regulatory
oversight depend, in part, on a financial institution’s capital
strength.
At December 31, 2008 and December 31, 2007, each of our
domestic bank subsidiaries was considered “well capitalized”
based on US regulatory capital ratio requirements. See the
Supervision And Regulation section of Item 1 of this Report
and Note 23 Regulatory Matters in the Notes To Consolidated
Financial Statements in Item 8 of this Report for additional
information. We believe our bank subsidiaries will continue to
meet these requirements in 2009.
O
FF -B ALANCE S HEET
A RRANGEMENTS A ND VIE S
We engage in a variety of activities that involve
unconsolidated entities or that are otherwise not reflected in
our Consolidated Balance Sheet that are generally referred to
as “off-balance sheet arrangements.” The following sections
of this Report provide further information on these types of
activities:
• Commitments, including contractual obligations and
other commitments, included within the Risk
Management section of this Item 7, and
• Note 10 Securitization Activity and Note 25
Commitments and Guarantees in the Notes To
Consolidated Financial Statements included in Item 8
of this Report.
The following provides a summary of variable interest entities
(“VIEs”), including those that we have consolidated and those
in which we hold a significant variable interest but have not
consolidated into our financial statements as of December 31,
2008 and December 31, 2007.
Consolidated VIEs – PNC Is Primary Beneficiary
In millions
Aggregate
Assets
Aggregate
Liabilities
Partnership interests in low
income housing projects (a)
December 31, 2008 $1,499 $1,455
December 31, 2007 $1,108 $1,108
Credit Risk Transfer Transaction (b)
December 31, 2008 $1,070 $1,070
(a) Amounts for December 31, 2008 include National City, which PNC acquired on that
date.
(b) National City-related transaction.
Non-Consolidated VIEs – Significant Variable Interests
In millions
Aggregate
Assets
Aggregate
Liabilities
PNC Risk
of Loss
December 31, 2008
Market Street $4,916 $5,010 $6,965(a)
Collateralized debt obligations 20 2
Partnership interests in tax
credit investments (b) (c) (d) 1,095 652 920
Total (c) $6,031 $5,662 $7,887
December 31, 2007
Market Street $5,304 $5,330 $9,019(a)
Collateralized debt obligations 255 177 6
Partnership interests in low
income housing projects 298 184 155
Total $5,857 $5,691 $9,180
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